According to a Cisco report, around 94% of all internet workloads will be handled by some sort of a cloud environment this 2021. Even as we speak, many online business operations these days are already being done with cloud software.
This trend makes it all the more profitable for software developers to jump in this direction and start developing their own cloud software. There are several aspects to consider when planning cloud software deployment, pricing being one of the most critical ones.
How to choose the correct cloud software pricing model? What are the factors that affect its pricing? How will you remain profitable while still offering your software at very competitive rates?
How Cloud Software Pricing is Done
Various things should be considered before you start pricing your cloud software. Due to the booming competition in the field, most customers look for higher quality services offered at very affordable rates.
There are various pricing models used for cloud software, and learning about them will help you understand how to price cloud software properly. They’re as follows:
Flat Rate or Fixed Pricing Model
As the name implies, this model involves offering your cloud software, showcasing its features, then applying a single price on it.
It’s usually the most straightforward method for cloud software pricing since no adjustments are necessary based on the users’ usage and consumption. In a way, it’s somewhat similar to the software licensing model, except that it’s often billed on a monthly basis.
Tiered Pricing Model
Many companies often use this pricing model to offer several “plans” or “packages” to their users. Each of these packages will have its own set of features and varying price points.
Compared to a flat-rate model, a tiered pricing model offers the basic features for the lowest priced package while the highest tier comes with all of the features of the lower levels plus some exclusive ones.
The number of packages offered varies from one provider to another, but the most common would be around 3-5.
Pay-Per-Use Pricing Model
In this model, users will only have to pay for the service depending on their consumption. The more they use the service, the higher their bills will be, and vice-versa. This pricing model is used by several popular services such as Amazon Web Services, Google Cloud and Huawei Cloud Disaster Recovery.
Freemium Pricing Model
Perhaps the most popular means of pricing a cloud software, the freemium pricing model works on the premise that a user can enjoy a free-to-use service but have the option to upgrade to paid packages to gain access to more features.
It’s often used alongside a tiered pricing strategy where a free, entry-level, tier is offered alongside the paid ones.
The free tier will have several limitations and only offer basic features, encouraging users to upgrade to higher tiers for more advanced features.
Which Pricing Model Works Best for Your Cloud Software ?
The cloud industry offers lots of room for experimenting with prices, so it’s in your best interest to try out any of the pricing models above to see which one works best for cloud software pricing.
If anything, analysing the competition is always a good idea, your best bet is to look for cloud software providers that offer the same services as yours, then try to see if their current pricing can be profitable for you.
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